In '08, New Orleans Tops Stern's List of Concerns

It is that time of year when the State of the Union, State of the State, and State of the City speeches are delivered. In about a month, the commissioner of the NBA, David Stern, will be delivering his own assessment of how the league is doing prior to the NBA All-Star Game in New Orleans on February 17. But Stern gave a little preview of what he will tell his owners and the press last week during a marketing promotion at the league's Fifth Avenue store.

"Well, our finances are good and up," Stern said. "Our basketball is great. Some of our teams are struggling at the gate — we have a half a dozen teams or so that are having some problems — but at the same time, we have 15 teams that have sold over 10,000 season tickets. So it is really a double tale, so to speak. But overall, business is great, ratings are strong, and attendance remains very strong."

Stern's "double tale" reference doesn't completely cover the business of the NBA. Seattle is suing the Sonics' ownership in an attempt to make sure Clayton Bennett and his group live up to the terms of the contract that onetime owner Barry Ackerley signed with the city in the mid-1990s, one that required the team remain in the city-owned arena through 2010. Bennett has threatened to take his NBA team to another city, presumably Oklahoma City, as early as the fall of 2008, unless Seattle or another Seattle-area community builds a new arena.

The league is still in conversations with the California Exposition and State Fair Board of Directors to develop a new arena and entertainment center on the grounds of Cal Expo in Sacramento. Stern is hoping that, at some point, there will be an agreement to build a new facility in that city, after voters overwhelmingly defeated an arena referendum in November 2006.

But New Orleans is front and center on the list of the most difficult problems that Stern needs to solve. Hurricane Katrina devastated the New Orleans area in 2005, and the area's economic recovery has gone much slower than anticipated. Prior to Katrina, New Orleans was losing population and economic clout. The return of George Shinn's Hornets to New Orleans from a two-year residence in Oklahoma City has been a failure so far. Shinn's Hornets averaged 14,221 customers per game in 2004–05. This season, Shinn's Hornets are drawing less than 12,000 per game. Last week, Shinn and Louisiana officials hammered out a new arena agreement that could keep Shinn's team in the city through 2014. But there is also an escape clause that will allow Shinn to move his team after the 2008–09 season if he cannot sell an average of 14,375 customers per home game for the final months of this season and all of next year.

Shinn is hosting the league's All-Star Game in February, which means that he not only has to sell more tickets this and next year, but he also has to hang onto those customers who bought season subscriptions just to have an opportunity to get All-Star Game festivities tickets. In an economically devastated area that was a questionable NBA market even prior to Katrina, this may be a difficult task, which is an assessment that even Stern acknowledges.

"[The new lease] sets out quite clearly that the Hornets very much want to stay for the duration plus in New Orleans. They've set some benchmarks that if we all work hard, we are hopeful that we will meet," Stern said.

The All-Star Game will give New Orleans a sports platform again, but the real question comes down to economics and whether or not New Orleans has the financial wherewithal to support a high-priced, luxury item such as an NBA team.

"We think so," Stern said. "We think [the All-Star Game], together with the city council to encourage broader distribution of their cable sports network, [puts us] at the beginning of a real growth spurt." Stern said.

New Orleans has only one of the three absolute essentials needed for a successful franchise: government support. There is very limited cable TV support, and there are few major corporate giants in the area. The cable TV battle going on between the Hornets and two multiple system operators in New Orleans' wealthier suburbs has not received national press play. Cox Communications, which runs Cox Sports Television and is the Hornets' cable TV rights holder, and Charter Communications were unable to reach a new carriage agreement last September because of the rising costs of sports rights fees and, because of that failure, Hornets games are not available in St. Tammany's Parrish. Charter reaches 200,000 people, and the NBA thinks it is critical that Hornets games are on cable TV on the north shore of Lake Pontchartrain in marketing efforts. A small market such as New Orleans cannot afford to lose any cable carriers.

Shinn may have a rough time keeping his franchise in New Orleans even if he hits the benchmark in attendance and resolves the cable TV problem. He could get as much as $6.2 million in annual subsides from the state through 2014. But the state, under the new agreement, is not going to spend $25 million to build a Hornets practice facility, which was part of the original lease agreement that brought Shinn to New Orleans from Charlotte in 2002.

Oklahoma City wants back into the league after it hosted Shinn's Hornets between 2005 and 2007, while New Orleans was being rebuilt. Officials are going to try and sweeten the pot for an owner looking to leave his present home — for instance, Bennett.

On December 20, Oklahoma City mayor Mick Corbett announced that the city will hold a referendum in March and will ask voters to approve a temporary one-cent sales tax to pay for $100 million worth of improvements at the city's five-year-old arena, so that the arena would be brought up to state-of-the-art standards for an NBA franchise.

Corbett feels that an NBA franchise in Oklahoma City would need a publicly built practice facility, along with better concession areas and other fan amenities. It's reasonable for taxpayers to spend about $100 million for entertainment. For that much, Oklahoma City can buy itself a place in the "big leagues" and call itself a "major league city." That proposal has to make Stern and his owners extremely happy.

The NBA will also have a big off-season, as this is an Olympics year and NBA players will be participating in the Beijing Games. The NBA has pegged an awful lot of its financial future on growing its industry in China and, so far, the strategy appears to be working.

"We are preparing for it with the rest of the world and the U.S. government," Stern said of the Beijing Olympics. "Hopefully it will be a very successful Olympics."

Despite all of the problems that the NBA has faced this decade with players' arrests and the Tim Donaghy situation, the business of the NBA continues to grow.

"Sports occupies an extraordinary spot in the hearts, the minds, the media, the government virtually of all countries," Stern said on why the NBA and other sports have not suffered from all of the doping and gambling allegations over the past year. "And it will continue to do so."

evanjweiner@yahoo.com